“Our goal is to get the company out of the shadows in which it currently finds itself, at least in the eyes of the public.”
Frankfurt It is an unusual change that is causing a lot of discussion in the financial center of Frankfurt: the long-standing Deutsche Börse manager Konrad Sippel has been hired by the start-up Solactive, which competes with the established index providers in the booming market for passive investments.
For Sippel, the change from the stock exchange with around 9,000 employees to a start-up with a good 250 employees was a conscious decision. “Of course I’m giving up the security in a large corporation,” says the 42-year-old. “But after 21 years at Deutsche Börse, it was time to do something new.”
Founded in 2007, Solactive, like MSCI, FTSE Russell and Deutsche Börse subsidiary Qontigo, is benefiting from more people investing in exchange-traded funds (ETFs). These reflect indices, which in turn track the price development of a selection of companies. According to the analysis company ETFGI, investments in ETFs worldwide recently totaled more than ten trillion dollars.
In contrast to Deutsche Börse, Solactive does not have any well-known flagships such as the Dax or the Euro Stoxx, but instead develops individually tailored indices for asset managers and investment banks. “This has the advantage that we are faster and more flexible,” says Sippel.
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In the case of large providers, the IT was primarily developed in order to calculate the leading indices in a stable manner. Individual solutions for financial market customers only came later as a side business. “At Solactive, this was the core business right from the start,” emphasizes Sippel. In addition, the start-up is often cheaper than established providers.
The Dax reform follows the Wirecard scandal
Sippel was born and grew up in Frankfurt am Main. From the eleventh grade he attended a boarding school in England and then studied mathematics in London. He later earned a management degree from Duke University in the United States.
When he started at Deutsche Börse in July 2000, the first ETFs were just coming onto the market in Europe and the index business had developed into an independent business segment. Sippel took care of it at Deutsche Börse for 16 years.
After the collapse of Wirecard in 2019, he was also part of a task force that pushed for a reform of the Dax. Wirecard shares were still a member of the leading index for several weeks after the payment service provider went bankrupt, which gave the stock exchange a veritable shitstorm. In response, the group issued stricter requirements for Dax members and also expanded the leading index from 30 to 40 values.
Apart from the Dax reform, however, Sippel has been primarily involved with data analysis, machine learning and artificial intelligence at Deutsche Börse since 2016. Among other things, his department built robots to classify e-mails and speed up processes. “It helped the company, but it wasn’t necessarily the kind of innovation I enjoy,” says Sippel. “That’s why it was very attractive for me to switch back to the index world.”
At Deutsche Börse, many see Sippel’s departure as a loss. “He has a constructive and critical spirit and knows the index business inside and out,” says a companion. “Solactive is happy.”
“Investors will never agree on ESG”
Sippel has more design options with the start-up than with the stock exchange, which has to comply with many regulatory requirements. “This makes processes more complex – and innovations are more difficult to implement,” says the manager. At Solactive, where he joined at the beginning of 2022 as head of the research department, there is significantly more freedom.
At the Frankfurt fintech, Sippel wants to discover new topics and further develop the platform for the development of indices. “Our goal is to get the company out of the shadows in which it currently finds itself, at least in the eyes of the public,” he says. “It is very difficult to invent a second Dax, but we want to set trends in new segments such as sustainability or Metaversum and talk about them more in public.”
Sippel is also closely following the dispute in the EU as to whether investments in gas and nuclear power plants should be classified as sustainable within the framework of the taxonomy. From his point of view, the conflict shows that it will not be possible to establish a uniform system of values when it comes to sustainability (ESG).
“Investors will never agree on the subject of ESG.” For some investors, the exclusion of weapons manufacturers is more important, for others the co-determination of employee representatives on the supervisory board. “For us as an index provider, this is an opportunity because we have the opportunity to offer individualized solutions.”
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